Key Case Decision Regarding Termination of Distributors

NewsAugust 1, 2017

On March 27, 2017, Frantz Ward attorneys Jim Niehaus and Chris Koehler obtained a key summary judgment ruling in The Bellas Co.et al. v. Pabst Brewing Co.on behalf of Pabst Brewing Company. The decision continued the ongoing evolution of the ability of manufacturers to terminate distributors under Ohio’s Alcoholic Beverage Franchise Act, a statute that has yielded much litigation in the past ten years but is finally starting to see some clarity.

Shortly after all the stock of Pabst was sold in 2014, the new owners decided to consolidate Pabst’s Ohio distribution network, and terminated several of Pabst’s distributors under Franchise Act provisions that permit a “successor manufacturer” to terminate those relationships within 90 days of acquiring the brands. The distributors banded together to challenge the termination, claiming the transaction in which the new owners purchased the stock did not fit within the strict language of the statute, as applied, constituted an unconstitutional taking of the distributors’ contractual rights.

The U.S. District Court for the Southern District of Ohio dismissed the distributors’ claims, rejecting their efforts to apply the Franchise Act in an overly technical manner, and instead embraced the practical approach to interpretation of the Act that has gained momentum in recent years. It also rejected the distributors’ constitutional challenge to the Act.